2014 health insurance outlook: 7 predictions

The health benefits community has been waiting for some force — a shift in employer preferences, a shift in insurer strategies, an upheaval in Washington or state capitals — to drop a hammer and smash everything to bits for decades.

People have been watching for the hammer ever since managed care organizations came along and smashed Indemnity Plan World.

Preferred provider organizations came along and loosened the grip of the health maintenance organizations, and health savings accounts came along and slowly revived the concept of imposing a meaningful deductible. But Managed Care World puttered along, never really changing in any dramatic way.

Cost increases slowed a bit, but costs kept rising. Newspapers in California kept running sad feature stories about casserole-baking widows with terminal tear jerking syndrome who had lost their individual health coverage because mean health insurance companies had discovered that the widows had forgotten to mention their acne on their initial coverage applications.

Now 2014 is just a few days away, and it’s still not clear whether the hammer is coming.

PPACA might come and smash Managed Care World as we know it to bits Jan. 1, or a few weeks or months later, or it might just blow away, or something else.

With all of that continued uncertainty about the Hammer of Managed Care World Doom in mind, here are my predictions for the health insurance community for 2014.

1. For some people, PPACA World will be heaven.

If the PPACA exchange plans really start to operate in 2014, and the PPACA rules that govern the individual and small-group markets really take effect in the coming year, at least for some new plans sold to some people, then the rules will hurt some and help some.

But, especially in the kinds of bureaucracy-phobic states that hate PPACA the most, people with diabetes and other health problems who are in the individual market may suddenly find that the new commercial health plans sold through the exchanges — the “qualified health plans” (QHPs) — open doors.

Moderate-income people with health problems who qualify for subsidized QHP coverage may get a level of low-stress access to decent health care that they had never dreamed of having.

2. Exchange managers will get into brutal court fights with the vendors that designed, built and integrated balky exchange enrollment systems.

The center of PPACA exchange news action will move from the exchanges’ board meeting documents pages to litigation tracking systems.

3. In states that have relatively low exchange plan enrollment because of exchange enrollment system problems, doctors, hospital executives, insurers and insurance regulators will send thank-you notes and bouquets to the information technology companies that caused the system problems that held down enrollment.

The Congressional Budget Office (CBO) predicted that the QHPs would enroll about 7 million people by the end of 2014.

Opponents of the Democrats are hailing any sign that the exchanges will fail to meet the CBO QHP enrollment goal as a wonderful sign that the exchanges, PPACA and the Obama administration are failing.

But the gloating over the prospects of low QHP enrollment may miss the reality that, whatever the problems with enrollment are now, the problems the complicated new plans have with administering claims in 2014 may be much messier.

A state with an exchange that enrolls the people who desperately want QHP coverage and a smattering of people who love the QHP concept may be a much happier state than a state that succeeds at getting the masses into QHPs.

4. The insurers, agents and brokers that sell hospital indemnity insurance, accident insurance, critical illness insurance and other products that are exempt from PPACA underwriting and pricing rules will flourish.

Even if PPACA World ends up working fine, insurers, employers and consumers are entering 2014 facing so much uncertainty that they will have a hard time making any decisions. They will just sit there, staring at computer screens, wishing someone else would call the shots.

Meanwhile, whether PPACA World really arrives or not, consumers will have higher deductibles, and they will face higher co-payment amounts, higher coinsurance levels and tighter limits on coverage for out-of-network care.

Designers of the QHPs, and non-exchange individual and small-group plans that are competing with the QHPs, have used high out-of-pocket cost levels to make the numbers work.

In the QHP market, for example, many families in the individual market will probably end up with mid-level silver plans. HealthPocket, a plan cost information firm, says the average annual silver plan deductible will be about $2,900 for an individual and about $6,100 for a family.

The average annual out-of-pocket spending maximum will be about $5,700 for an individual and about $11,500 for a family.

Few of the PPACA rules driving the cost-sharing increases in the individual and small-group markets have much direct effect on large-group plans, but designers of large-group plans have been using similar principles to hold down claims at their plans.

Many insurers have already prepared for the Year of the Gap Fillers by announcing new health product worksite sales programs.

Aetna (NYSE:AET), for example, has added a program that will combine sales of voluntary protects such as hospital indemnity insurance with high-deductible health plans.

5. Health policymakers will start thinking about what PPACA World 1.5, Son of PPACA, or Anti-PPACA World might look like.

After watching consumers flail around trying to figure out how to pay $11,500 in out-of-pocket health care costs each year, they might start thinking about either lowering annual maximum out-of-pocket spending limits or encouraging the sale of gap fillers.

After getting reports about consumers struggling to make timely appointments with the rare doctors who happen to be in the new, narrow “high-performance provider networks,” the policymakers might start to think about updating network adequacy standards.

6. The people directly involved with the dental, vision and disability insurance markets will be looking for someone — anyone — to talk to.

Few employers or consumers will have the energy to make active efforts to drop their dental, vision or disability coverage, but few will have enough mental energy left after slogging through PPACA World — or PPACA Failure World Chaos, if that’s what we have — to think much about expanding dental or disability coverage.

The producers who figure out a way to have a benefits expansion application form filled out, ready for the buyer’s signature, and physically put the form in front of the buyer, and do something about the buyer’s laundry, and give the buyer calming herbal tea, to help the buyer overcome PPACA trauma, might have a chance at making new sales.

Other producers may have to wait until the buyers calm down enough to stop crying and cursing so much.

7. The flexible spending account (FSA) carryover rule will bite employers and their human resources’ staffers and vendors in the hind parts.